Could RFG face a class action?

A law firm is investigating a possible class action against Donut King and Gloria Jean's parent company Retail Food Group on behalf of disgruntled franchisees.

Bannister Law, which is already looking at taking class action on behalf of RFG shareholders, says it has expanded the scope of its probe to include franchisees.

The firm is focusing on representations the retailer made to incoming franchisees about the profits, terms of operation and fees of the franchise store being purchased.

Shares in RFG have more than halved in value since allegations of mistreatment of franchisees by the parent company first emerged in media reports in early December.

The firm said a number of concerns have been raised by a multitude of franchisees including the disclosure provided upon purchase and other representations made to incoming franchisees, including the terms of operation, and contributions made by the franchisees including, but not limited to, marketing fees.

According to Bannister Law founder Charles Bannister, “Accounts by many franchisees suggest that some franchisees may have been forced into severe financial hardship. Many have been left devastated – financially and personally.”

Retail Food Group noted the announcement regarding a potential class action and said in the event a class action did proceed at some future point, RFG would defend it vigorously.

“As Australia’s largest multi-brand retail food franchisor, we are proud to support numerous small businesses across Australia,” said RFG in a statement.

“We remain committed to the livelihood and profitability of each and every one of our franchise partners.”

Bannister Law is working with franchisees and the action group Franchise Redress to investigate the potential of a class action or other action on franchisees behalf.

Co-founder of Franchise Redress, Maddison Johnstone, said, “We’ve had contact from over 100 franchisees, many of whom have raised concerns around RFG’s conduct.”

“They allege issues around the company’s goodwill, the viability of stores at sale and the lack of appropriate disclosure on a range of matters including the prior performance of stores at purchase,” she said.

“Given the accounts of hardship, it is important to us that franchisees have an avenue of redress for the severe financial distress they’re living with.”